Is income relevant for health expenditure and economic growth nexus?
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Is income relevant for health expenditure and economic growth nexus? ˙ Nadide Sevil Halıcı-Tülüce1 · Ibrahim Do˘gan2 · 3 Cüneyt Dumrul
Received: 24 February 2015 / Accepted: 26 October 2015 / Published online: 21 November 2015 © Springer Science+Business Media New York 2015
Abstract This paper examines the relationship between health expenditure and economic growth using panel data consisting low and high-income countries. Using dynamic panel data methodology, we analyze twenty five high-income and nineteen low-income economies for the periods of 1995–2012 and 1997–2009, respectively. We find reciprocal relationship between health expenditure and economic growth in the short run and one-way causality from economic growth to public health expenditure in the long-run. In high-income countries, there is a two-way causality for both private and public health expenditures in the short-run, while in the long-run there is a one-way causality between economic growth and private health expenditures. The crucial finding of this study is that private health expenditures have negative influence on economic growth while public health expenditures have both negative and statistically significant effect. Keywords
Economic growth · Health expenditure · Causality · SGMM
JEL Classification
B
I15 · I18 · O4
Cüneyt Dumrul [email protected] Nadide Sevil Halıcı-Tülüce [email protected] ˙Ibrahim Do˘gan [email protected]
1
Faculty of Economics and Administrative Sciences, Melik¸sah University, Kayseri, Turkey
2
Faculty of Economics and Administrative Sciences, Bozok University, Yozgat, Turkey
3
Faculty of Economics and Administrative Sciences, Erciyes University, Kayseri, Turkey
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N. S. H. Tülüce et al.
1 Introduction With the developments in medical science and health technology, the average life expectancy has increased in both developed and developing countries in the twentieth century. Factors such as better nutrition, awareness about health issues, good sanitation condition, improvement in medical technologies, and strengthening public health infrastructure have progressively increased the human life expectancy. These developments may have affected economic growth and its steady-state rate by influenced human capital accumulation. Capital accumulation relies on the savings rate that is also influenced by better health condition. In one of the first studies relevant to the health-economic growth relationship, Grossman (1972) expresses health as one dimension of human capital accumulation in which people can invest. People are endowed with an initial stock of health status that diminishes during the time. By the mid-1980s, endogenous growth theories based on Romer (1986), Lucas (1988) and Rebelo (1991) created models of technological development and human capital formation on productivity. These models repaired the shortcomings of the Solow growth model about determining growth in the long-run. These models also demonstrated the existence of variable (such as human capital, R&D, public expenditu
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